Policymakers ignore job-growth issues

Ready for a little “Econo-Jeopardy”? How about “jobless recovery” for $500?

Answer: 46 months.

Question: How long did it take since the recession began to regain the lost jobs?

That’s all the way from March 2001, when the recession officially began, until January of this year.

In other words, it took almost four years for U.S. payrolls to climb back to where they stood in early 2001.

The historical average is 21 months.

Understanding this phenomenon is one of the most important challenges facing economists and policymakers. The fact that we’re finally adding jobs is an unequivocal plus, but the job market continues to underperform on a monthly basis. This reality led to a significant, though underappreciated, revision by the Bush administration’s economics team.

In early 2004, the President’s Council of Economic Advisers projected an average of 300,000 jobs per month in the coming year. Indeed, the council’s chairman noted that such gains were “… about average for a recovery.”

As it turned out, the average monthly gain for the year was 181,000, leading the council to reduce its forecast for this year to 175,000.

Last month — the month that finally restored the pre-recession employment level — net job growth clocked in at 146,000. We’re not even meeting diminished expectations.

The problem has drawn little interest from policymakers.

We’ll need to look at the role of deep trade imbalances, offshoring, a profit-squeeze on job and wage growth, the cost of employer-provided health care, and what appears to be more of an inventory-control approach to hiring.

But we’ll never figure this out if we fail to sound the alarm that something is radically amiss. Working families simply can’t afford another 46-month slump.

Jared Bernstein is a senior economist with the Economic Policy Institute in Washington, DC.

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